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Should not-for-profit tax status be only for strictly charitable groups? 

Most people in the world think of a not-for-profit entity as being in existence for the primary purpose of doing good for the community or on a much larger scale - for the world as a whole.  The terms not-for-profit or non-profit bring to mind the Red Cross, Goodwill Industries, The Salvation Army or even Amnesty America and it's affiliates. We tend to think of a non-profit as being an altruistic enterprise that dedicates all of its efforts towards acts that benefit others.

Some businesses have taken abusive advantage of the various state and US tax codes to declare themselves a non-profit corporation. This means that only a portion of a non-profits' income must be donated to the community to qualify. This donation or contribution may be made in the form of money, of goods, or of donation to another non-profit corporation and/or services.

The following presentation is a graphic example of a corporation stretching the non-profit loopholes until they are big enough to drive
the Titanic through.

Is Kaiser Permanente Really A Not-For-Profit Organization?-

The IRS doesn't even recognize them as an entity so I do not understand how they can say they are a Not-For-Profit Organization.

After you read the content of this web page, if you are so inclined, we encourage you to follow this link:
http://www.usalone.com/non_profits.htm?kpapers
which will take you to The People's Email Network where you may voice your opinion on this topic.  At the same time you will be letting Congress know where you stand on this issue and what you think they should do about it. 

Is Kaiser Permanente Really A Not-For-Profit Organization?- 
The IRS doesn't know who they are so we do not understand how they can say they are a Not-For-Profit Organization.

Is This Self Proclaimed Not For Profit Which is Really Three Separate Companies Actually an Impostor? 

While it appears that Kaiser and the for Profit Permanente stretch the truth it is vitally important that Kaiser be absolutely truthful because they are trusted by patients with their lives. Firemen and Policemen are held with high standards of ethical behavior.  Kaiser and the Permanente should be held to a higher standard of  behavior because they deal with life and death issues. 

Kaiser Permanente is a (fictional entity) - a trade name. It is composed of not-for-profit and for-profit companies. In our opinion the brand name Kaiser Permanente is deceptive and intentionally misleading when they  represent themselves as a not-for-profit organization.  In our opinion, this misrepresentation is a clever marketing gimmick designed to portray Kaiser Permanente as a health care provider with no financial incentives (or motives) and with only the pure purpose of benefitting the health interests of the Kaiser member.

There is no tax status for the brand name Kaiser Permanente. The IRS does not recognize them as they are not listed as an organization or entity in IRS records.

INTRODUCTION - By Dr. Charles Phillips

1.  Kaiser Permanente - a three part organization - originally developed as a profit system between two men - Henry Kaiser, Sr. and Sydney Garfield, MD;  both were millionaires, Dr. Garfield making $250,000 in profit in four years during the depression from his (pre-Kaiser) "Contractor's Hospital." 

2.  The reorganization of the prepaid health system came in about 1948 per Dr. John G. Smillie's book on Kaiser - "Can Physicians Manage The Quality and Costs of Health Care? - The Story of The Permanente Medical Group" page 77 - 4th paragraph down - "For tax reasons, it was necessary to establish clear-cut distinctions between the Foundation, a nonprofit trust,  the hospitals, a charitable corporation, and the medical group, a profit making partnership.  Since Garfield had a proprietary interest in both the hospitals and the medical group under the previous organizational structure, it was necessary to buy him out of the hospitals, which Henry J. Kaiser did, and to restructure his proprietor-employer relationship with the other physicians."

3.  All of the original names included "Permanente" (named for a year-round small river in Los Altos - the Plan, the Hospitals, and the Medical group;  in 1952 the names changed to the Kaiser Foundation, the Kaiser Foundation Health Plan, and the Kaiser Foundation Hospitals (page 115).

4.  The Permanente physicians, not wishing to look like Kaiser employees, kept the name of the Permanente Medical Groups, though that displeased Henry Kaiser and the legacy he wished to create. (Pages 115 - 116)

5.  The division of profits between the Hospitals and the Permanente physicians occurred after after "3 days of continuing and frequently stormy discussion" (page158) at the home of Henry Kaiser on Lake Tahoe; the Tahoe Agreement (http://www.kaiserpapers.org/tahoe.html) ended up with a formal division thereafter of the following: "Excess revenue would be equally distributed" between the hospitals and the physicians.

6.  The same Tahoe I agreement made sure that the physicians could be present and influence the Health Plan board and the Hospitals Board, the composition of the two being the same;  in 1998 there was a reaffirmation of the profit system and acceleration of physician power in the Tahoe II  (and also at http://www.natpact.nhs.uk/uploads/BobCrane.ppt - The Bob Crane Power Point Presentation ) and (http://xnet.kp.org/permanentejournal/winter00pj/map.html)agreement setting up the National Partnership Committee.

7. The flow of money from Plan profits to the individual physician in retirement - half of the expected $1.5 billion profit of 1994 going this way - is a subject that has been kept as secretive from the public as the missile launch codes of the President;
 
Kaiser Permanente's Claim What the Documentation Shows
Kaiser Permanente claims to be a non-profit organization which is recognized by the IRS.

http://www.kaiserpermanentejobs.org/aboutus/history.asp

Kaiser Permanente is composed of Kaiser Foundation Health Plans (nonprofit corporations), Kaiser Foundation Hospitals (a nonprofit, public-benefit corporation), and the Permanente Medical Groups 
(for-profit professional organizations). 

Kaiser states:
"Today, we are the largest nonprofit health care organization in the United States, serving approximately 8.2 million people in nine states and the District of Columbia, thanks to the dedication of some 147,000 employees and physicians.
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Page 8  of IRS form Form 990 year 2002
Why the Kaiser Health Plan - not the Permanente is a non private Foundation:

12. An organization that normally receives (1) more than 33 1/3% of its support from contributions, membership fees, and gross receipts from activities related to its charitable, etc., functions-subject to certain exceptions, and (2) no more than 33 1/3% of its support from gross investment income and unrelated business taxable income (less section 511 tax) from businesses acquired by the organization after June 30, 1975. 
*****

They are not a non-profit.  Check for yourself at the IRS:
http://apps.irs.gov/app/pub78
 

The only listing using the words Kaiser Permanente is a division of Kaiser Foundation Health Plan - The Group Health-Kaiser Permanente Community Foundation  Seattle,  WA.
Link to Form 990 year 2003 - The Group Health Kaiser Permanente Communitty Foundation in Seattle, WA.
http://www.ghc.org/about_gh/co-op_overview/taxes/ghnw990_2003.pdf
Group Health describes themselves an an affiliate of Kaiser. Not a division.

"The affiliation--unique in the Kaiser Permanente family--creates a joint nonprofit company, Kaiser/Group Health, to oversee and coordinate Group Health and Kaiser Permanente Northwest. They make up the Northwest Division. Each of the local organizations retains its own governance system and is responsible for activities such as quality assurance and health care delivery."
http://xnet.kp.org/permanentejournal/spring98pj/ghc.html
also
Because of the planned and subsequent accomplishment of an affiliation between GHC and the Kaiser Foundation Health Plan, GHC initiated the separate corporation, GHP. GHP is a professional service corporation whose corporate shareholders are physicians, physicians' assistants, certified nurse midwives, and other professional health care providers. GHP was granted corporate status by the state and the professionals began providing health care as shareholders on or about December 31, 1997. Under the law, such a corporation must have all of its shares of stock owned by the professionals.
GROUP HEALTH PERMANENTE P C
DOCKET NO. 98 20064
Subsidiaries (WAC 296-15-023)

How did Kaiser become a a non-profit when it has over 25 BILLION dollars(and growing) above it's costs since 1991?

From Washington State:*When one corporation exercised virtually complete authority and influence over a second corporation, controlled the assets of the second corporation, as well as the policy and daily operations through the appointment of the medical director, the second corporation is a subsidiary of the first under the definition in WAC 296-15-023. ….Group Health Permanente, P.C., 98  20064 (2000) http://www.biia.wa.gov/self.htm
****

"Kaiser tries to escape its reality of being a prepaid health plan allowed by Congress to ration health with ERISA protection ((http://www.rescuehealthcareday.com/Kaiser'sER.htm)(explanation and commentary))(http://www.chcf.org/documents/insurance/ERISAvariationsSummary.pdf)  It tries to get away from the HMO term and create brand logo myths far from the truth.  One false image is that "Kaiser Permanente" has been judged by the IRS to be non-profit.  A second false image is that the physicians are salaried and independent of bean counters.  Not one newspaper in the country wishes to investigate either concept, perhaps because the Kaiser Family Foundation contributes money directly to newspapers, reporters, National Public Radio, etc.  And Kaiser Permanente buys ads in almost all newspapers in their care regions.

But the ad approach does pull the IRS in due to IRS silence on both issues.   Certainly it is not for lack of knowledge by the IRS.  The IRS knows full well that it never gets any Form 990 for Kaiser Permanente because it is not a business entity.  And the IRS has had enough dealings with the physician profit systems - even creating special letters - to know that salaries are only a part of the physicians' income." - 
Charles Phillips, MD
*****

PAYMENTS TO PHYSICIANS IN THE PERMANENTE 
MEDICAL GROUP by Morris F. Collen, M.D.
The Permanente Medical Group, Inc. August 1985
Contractor Document
Health Program, 0ffice of Technology Assessment
U.S. Congress, Washington, DC  20510 
From Item 3.  ALTERNATIVE PAYMENT PLANS TO TPMG PHYSICIANS - 3-1-10

C.  SENIOR PHYSICIANS IN A CORPORATION (TPMG,  Inc.,  1982- ) - 3-3-12

In 1982, TPMG became incorporated in order to implement an IRS qualified retirement program with protected pension funds, and to better protect its physicians' personal assets from seizure from lawsuits against TPMG.  The articles of incorporation were carefully drafted so as to impact TPMG as little as possible in its internal organization and operation and in its relations with the Health Plan and Hospitals. 

The hoped for result was that TPMG physicians would continue to perform as they did in the partnership but for them to have greater personal financial security. 
***** 

http://businesspractices.kaiserpapers.org/irs.html
In 1998 Kaiser wrote to the IRS ((LTR 9810005)
( http://www.kaiserpapers.org/LTR 9810005.html)) to get special permission to hold the Permanente benefit package under the Kaiser non-taxed umbrella (501)(c)(3) to be released to the Permanente physicians as they retired.  Done in this form, Permanente would not be taxed as the money accrued.

This is called a grantor trust.   This was a change from Permanente simply billing for such payouts as they occurred.  (It also answers my question of why Southern California Kaiser Permanente Group chose partnership rather than following the corporate approach of Northern California (The Permanente Medical Group or TPMG, Inc.) ...... -
Dr. Charles Phillps
*****

Page 25  of IRS form Form 990 year 2002 - Reserve for Physician Retirement Plans - End of Year - $1,417,880,304 Why the Kaiser Foundation Health Plan is allowed to handle the Permanente physicians retirement fund other than for the sole purpose of not paying any taxes on it is unknown to us.  The IRS has informed us that it is not a IRS matter but rather a Labor Department matter.  The Department of Labor informs us that this is an ERISA matter which is overseen by The Department of Labor.  The Employee Retirement Income Security Act of 1974 (ERISA), a federal law that sets minimum standards for pension plans in private industry.
*****

Kaiser to reveal incentives for physicians
Kaiser Permanente will make public financial incentives it offers physicians and will not resume a program that offered call-center clerks bonuses to limit patient appointments with doctors.
***** 

Lawsuit disputes truth of Kaiser Permanente ads
"Clearly, there is a cookbook for medicine at Kaiser that was concealed from the public," said Jamie Court, executive director of the consumer group, which is based in Santa Monica. - Jamie Court
*****

The Kaiser Thrive Campaign
also  information at:
http://kaiserpapershawaii.org/
The Kaiser threefold organization spends an average of $50,000,000 a year on advertising, as it cannot count on any good word of mouth recruitment from its marginalized patients; the is direct advertising that even appeared in the Olympics in 2004 - basically eat broccoli and fruit and stay home.
*****

Kaiser Uses 990 to Emphasize Non-profit images with for profit physicians obscured;

"The Permanente Medical Groups accept responsibility of professional care of Health Plan members; are responsible for their own physician recruitment, selection and staffing; and are legally separate entities independent from Health Plan and Hospitals"
*****

A little chart showing where the money actually goes
A chart clearly showing the Kaiser Permanente Money Trail - originally prepared by California Nurses Association
While Kaiser no longer conducts business in some of the regions listed on this chart the information is still relevant.
*****

Kaiser and the Permanente often claim that physicians have no stock interest in the company. 

Frequently Asked Questions About Kaiser 
"As of 2002, approximately 95 percent of 
physician compensation was paid in salary."
*****

Kaiser Tries to Look Benevolent (no KP stocks);
"Because Permanente physicians are compensated primarily through their salaries..."
*****

http://parents.berkeley.edu/recommend/insurance/kaiservshmo.html
"The CEO of Kaiser recently said that Kaiser has a ''mission dividend'', not a stock dividend, which distinguishes Kaiser from the for-profits. Kaiser's mission is to deliver affordable, quality care."
*****

The Permanente Medical Group Clearly Has Stock
From the Permanente Articles of Incorporation
*****

http://www.healthcarepriorities.org/presentations/w4-1l.ppt
Page 9
3 year “path to shareholdership”
Vote at 2 years and at 3 years
Financial “buy in” - 2 “shares” of stock issues to TPMG, Inc.
Representative decision making: physician right and responsibility to contribute to group decisions
*****
http://www.kaiserpapers.org/arrindell.html
ARRINDELL v KAISER HEALTH PLAN
No. 962209u 
Each eligible physician is allowed to purchase two 
shares of CAPMG stock after twenty-four months of service, a third share after thirty-six months, and a fourth share after forty-eight months of service. 
*****

Kaiser Permanente routinely states that the 
doctors are salaried employees

Kaiser Colorado spin on Salaries
http://www.harp.org/manip/colospin.htm
*****

Physicians Brag about being Part Owners;
"I attribute Kaiser Permanente's success to the fact that 
it is a physician-governed and physician-owned group.

It is a prepaid capitated system and payment is made 
to the physicians who are directly responsible for quality patient care and management of costs and resources.  Incentives are structured to encourage appropriate, cost-effective utilization while still providing the best quality care.  .....I consider myself, however, a part owner.  We all share in profits and loses.
*****

Kaiser states they are telling nothing but the truth.

"The Permanente Medical Group

In the Medical Group, we have reduced our 
cost structure 25 percent, as it relates to inflation over the past five years. 
During that period of time, we have demonstrated objectively that we are able to improve service and quality as well. 

We are in the process of restructuring delivery of health care, by moving it away from individual physician and patient encounters to empanelled multi-disciplinary teams of providers that will be accountable for their 
panels of patients 24-hours a day, seven days 
a week."
http://tinyurl.com/727dg
*****

For Physicians and Staff of The Permanente Medical Group
July 2004 - 
Membership across the Program fell by 150,000 in 2003

In order to recover and grow membership, KP must improve its image among non-members 
*****
 

Dr. Robert Pearl, chief executive of Kaiser, said at a private meeting that "we chose not to provide our patients with what they desired," 
The paper's staff reviewed Kaiser documents, including e-mails and notes of private meetings, and found Kaiser encouraged its doctors in Northern California to make themselves as unavailable as possible to their patients in an effort to lower patient demand and costs.
*******

"As Kaiser has gotten some $5 billion in tax benefits in the last few decades alone, the public deserves more than silence when it is being fooled.  At the very least the IRS could tell the overseers of the Senior Advantage program to better review the Kaiser ads for truth.  If government chooses to sleep this one through, then the government is a coenabler and equally responsible for the Wild West atmosphere it creates; and you can kill tens of thousands more people by not ordering tests than you can with a six shooter." Charles Phillips, MD

Actually state and federal taxing agencies are also involved when the trio at Kaiser can sell $3 billion in tax free bonds, the bond documents ( (first series offered)(http://businesspractices.kaiserpapers.org/pdfs//bonds.pdf) being lies as well.  How about $350,000,000 in bonds sold under the name "Kaiser Permanente."  First of all, KP can't sell bonds and is only a fictitious name for the consortium of Kaiser businesses called the "Credit Group."  Secondly, the lie is repeated about KP being non-profit: "For-profit enterprises may have access to capital at a lower cost or on more favorable terms than Kaiser Permanente and other nonprofit health care systems."  (page 16  - Kaiser Permanente bonds).  This nonprofit grouping including the for profit physicians created a profit of $1.5 billion in 2004;  half went to the physicians for the chief skill of not ordering tests.  The fraud again draws in the IRS. 

In fact, the bond pamphlet suggests that the IRS might change its mind some day. The Private Letter Rulings might change.  "... tax exempt health care providers currently are subject to an increased degree of scrutiny and enforcement activity by the IRS."  So Kaiser knows that they can only fool the public with the help of the IRS.

Check: Kaiser Permanente Southern California Region, Business Plan, 1995–1997, p. 18, from Jamie Court and Frances Smith, Making a Killing: HMOs and the Threat to Your Health, Monroe, ME: Common Courage Press, 1999, pp. 42 and 48.
*****

http://www.justhealthcare.org/curriculum.pdf
Page 23 - Kaiser's Cost Cutting Tactics
A confidential Kaiser Permanente Southern California Region Business Plan for 1995 through 1997 reveals the mentality of corporate costcutting in the delivery of patient services.  Below are 
some excerpts from the plan.

Kaiser’s Cost-Cutting Tactics:

1. Reducing the number of patients hospitalized by more than 30 percent;

2. “Shifting surgical cases from inpatient to outpatient (i.e., gall bladders,mastectomy/lumpectomy,appendectomy)”;

3. Rationing high-cost prescription drugs;

4. “Aligning physician bonus pay and leadership compensation to target achievement,” (i.e., giving doctors bonuses for reducing hospital admissions);

5. “Implementing care paths for chest pain and stroke,” (i.e., discharging patients early or removing them early from Intensive Care);

6. “Reducing staff in surgical and primary care specialties...”;

7. Requiring “alternatives for Skilled Nursing Facility admissions and lengths of stay,” (i.e., moving patients into nursing homes or their own homes). 
*****

Kaiser methods to fulfill it's 5% charity requirements.
 

Kaiser Foundation and Hospital is a public charity with a 50% deductibility limitation.

Kaiser Year 2002 Form 990 
*****

Shopping hospitals' price lists
By inflating the value of medical procedures, etc., and then providing a prearranged cut in cost and writing it off as a charity service is rather deceptive we think. 
*****

Providing chap stick along with literature at community health care booths staffed by volunteers is another misleading technique that we think they are using.  Putting on luncheons for Seniors as a marketing tactic and renting a bus to transport them is also another misleading write off.
*****

Kaiser Year 2002 Form 990 
Beginning page 71 - What Kaiser Foundation claims they do for the communities.  Page 83 - specifics on Medicaid.  Page 90 gives you the figures. Follow the money trail on this section. 

Some deductions may be Federal and  State Funded programs on which Kaiser accepted a legislated reimbursement lower than "list price" and counted the difference as a charitable deduction.
*****

Read over the Kaiser tax return for yourself. Kaiser Year 2002 Form 990 

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